My Virtual Log Book

One of the blogs I frequently visit is BlownMortgage which has been around for quite a while. There was quite an interesting post on it a few days back. Even though the original post from the archives is from 2007, yet I thought I’ll link it over here as it’s quite a well intended piece.

From his post:

Here are some common misconceptions about brokers, and a humble rebuttal.

• Brokers don’t have to be licensed
• Brokers have no decision making power
• Brokers are financially unstable
• Brokers are a rip-off

Here are some common misconceptions about mortgage bankers; again with a rebuttal:

• Bankers charge more on loans – you just don’t know it
• Bankers are limited to only one of two programs
• Bankers have better rates

The best part of this post was this simple analysis-list where he jotted down the pros and cons of working with a broker and a banker.

Some pros and cons of working with a broker

Pros

• Low overhead can lead to lower rates
• Wide range of products from diverse lending sources
• Can source many different financing options
• Must disclose all compensation associated with loan

Cons

• Necessary middleman
• Sometimes limited decision making ability
• Can be ephemeral, lower barrier to entry for business owners

Some pros and cons of working with a mortgage banker

Pros

• On-site decision making ability, more control over the process
• Better rates for larger banks (volume discounting)

Cons

• Don’t disclose yield spread premium profit
• May charge additional fees to support overhead (underwriting, etc.)
• May not have true decision making ability

I just wish that he could have given more of an emphasis on the ethics involved as opposed to the “deal” for the borrower. Nevertheless, a really ‘informational’ post and a must read.

Filed under: Finance, Mortgage, Products & Websites